The science behind subscription model
Discover the science behind why consumers stick with subscriptions
Last updated
Discover the science behind why consumers stick with subscriptions
Last updated
The success of subscription models in eCommerce is deeply rooted in behavioral economics. By simplifying the purchasing process and delivering consistent value, subscriptions naturally retain customers and generate recurring revenue.
Once a consumer signs up for a subscription, they tend to stick with it due to the inertia of maintaining their current behavior rather than actively seeking out alternatives.
This article dives into the science behind why consumers stick with subscriptions and how businesses can leverage these insights to foster customer loyalty and long-term success.
This status quo bias makes it less likely for customers to cancel, as people generally prefer to avoid the effort of change.
Research highlights how status quo bias significantly impacts customer behavior in subscription models. A study found that nearly 72% of subscribers with automatic renewals tend to maintain their subscriptions, even when they might not actively want them, due to the inertia of sticking with the familiar. This resistance to change means that customers are less likely to cancel, leading to longer subscription periods and improved Lifetime Value (LTV) for businesses.
A customer subscribes to a monthly shaving kit like Dollar Shave Club. After a few months, they continue the subscription not because they are actively evaluating alternatives, but because it’s easier to let the subscription auto-renew than to cancel and find a new provider. The convenience of automatic shipments reinforces this bias
The sunk cost fallacy plays a critical role in subscription retention. Research shows that when consumers pay an upfront fee or make an initial investment in a subscription, they tend to remain subscribed even if the service no longer provides the same value.
This behavior stems from a desire to justify their previous spending, making it psychologically difficult to cancel the subscription. Especially when customers have paid a substantial upfront fee, like annual memberships or one-time setup costs for services such as gyms or digital content subscriptions. These customers are less likely to cancel, as they need to validate their initial investment.
A customer signs up for a gym membership with a 12-month commitment but gradually stops going after a few months. Even though they no longer use the gym, they continue paying for the subscription because they feel they’ve already invested time and money into it.
Canceling the membership would make that initial investment feel wasted, so they keep it, even if they no longer benefit from the service. This behavior reflects the sunk cost fallacy, as they remain subscribed not based on the future value, but because they want to justify the initial investment
The tendency for individuals to strongly prefer avoiding losses over acquiring equivalent gains—plays a crucial role in the retention of subscription customers.
In behavioral economics, losses are often perceived as more painful than the pleasure gained from an equivalent win. This means that customers are more motivated to stay subscribed due to the fear of losing benefits or access they currently enjoy, such as convenience or special pricing.
This makes loss aversion a powerful tool for businesses seeking to optimize their subscription models and maintain predictable, recurring income
A customer signs up for a food delivery subscription like HelloFresh, receiving weekly meals. When considering canceling, they might worry about losing the convenience and time savings the service provides, outweighing the financial cost. The fear of losing these benefits makes them stay subscribed
Subscription models thrive in eCommerce by leveraging key concepts from behavioral economics, such as status quo bias, sunk cost fallacy, and loss aversion. These principles explain why customers tend to maintain subscriptions and provide businesses with steady, recurring revenue.
Understanding these behaviors helps businesses optimize their subscription strategies and foster long-term loyalty.
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